The correct answer is that the situation is most directly addressed by the Prevention of Bribery Ordinance (POBO). Under POBO, a TC Adviser and its staff are considered agents of their client. Section 9 of the ordinance makes it a criminal offence to offer an advantage to an agent as an inducement or reward for the agent not acting in the best interests of their principal (the client). The offer of a personal payment, even if disguised, clearly constitutes an ‘advantage’ intended to influence the adviser’s professional duties. The other options are incorrect. The common law offence of conspiracy to defraud requires an agreement between two or more persons to act dishonestly to cause economic loss to a victim. In this scenario, the primary issue is the unilateral offer of a bribe, not an established agreement to defraud. Section 101E of the Criminal Procedure Ordinance pertains to the criminal liability of directors and officers when their corporation commits an offence with their consent or connivance; it does not define the initial offence of offering a bribe. While the Listing Rules address conflicts of interest, the act described is a specific criminal matter governed by POBO, which is a more direct and severe legal consideration than a breach of exchange rules.

The correct answer is that providing an irrevocable undertaking to accept an offer, on its own, does not automatically lead to the presumption that the shareholder is acting in concert with the offeror. The Hong Kong Code on Takeovers and Mergers specifically clarifies this point. It recognizes that securing such undertakings is a common commercial practice for an offeror to gain certainty before launching an offer. The critical factor is whether there are other agreements or understandings between the shareholder and the offeror that suggest a broader cooperation to secure or consolidate control of the offeree company. The Executive will consider the totality of the circumstances. An arrangement is not automatically deemed a concert party simply because it formalizes a shareholder’s intention to accept an offer. Similarly, while directors of an offeree company are presumed to be a concert party amongst themselves, this is a separate presumption (Class 6) and does not mean any shareholder giving an undertaking is automatically treated as a concert party. Finally, the Takeovers Code does not apply a specific shareholding percentage threshold to an irrevocable undertaking to determine if it creates a concert party; the assessment is based on the nature of the relationship and any underlying agreements, not the size of the stake.

Statement I is correct as proactive self-reporting of misconduct to the SFC, especially before an investigation is initiated, is a primary factor the SFC considers when assessing the level of cooperation. Statement II is also correct. Under the SFC’s Disciplinary Fining Guidelines and its general approach to cooperation, a reduction in the fine of up to 30% may be granted for early and full cooperation, which includes self-reporting, accepting liability, and taking remedial action. Statement III is incorrect; cooperation with the SFC mitigates the severity of sanctions but does not guarantee immunity from public disciplinary action. The SFC may still issue a public reprimand or other sanctions, even in cases of full cooperation, to maintain market integrity and deter others. Statement IV is correct because when the SFC issues a public announcement regarding a disciplinary action, it often explicitly mentions the extent of the regulated person’s cooperation. This can help to demonstrate to the public and clients that the firm has taken the matter seriously and implemented corrective measures. Therefore, statements I, II and IV are correct.

Under the Hong Kong Code on Takeovers and Mergers, a party that announces it does not intend to make an offer for a company is generally restricted from making an offer for that same company for a period of six months. However, the Executive may grant consent to waive this restriction under specific circumstances. The correct answer is that Zenith Ventures may proceed with a new offer with the consent of the Executive, as a third party has announced a competing offer. The emergence of a new, formal offer from a third party (Apex Holdings) is one of the key exceptions that allows the Executive to permit an otherwise restricted party to make a new bid. The fact that the target company’s board is supportive further strengthens the case for granting consent. One of the incorrect options states that Zenith Ventures is strictly prohibited for another two months; this is wrong because it ignores the specific exceptions to the six-month rule. Another incorrect option suggests that Zenith must wait until the competing offer from Apex Holdings concludes; this misinterprets the rules, as the competing offer is the trigger that allows Zenith to re-enter, not a barrier. The final incorrect option incorrectly combines elements of a different exception, which relates to a board recommendation in the absence of a competing bid and has its own set of conditions, such as the offeror not being a substantial shareholder.

This question assesses the application of the General Principles of the SFC’s Code of Conduct in a corporate finance advisory context. Statement I is correct because General Principle 2 requires a licensed person to act with due skill, care and diligence and in the best interests of its clients and the integrity of the market. This includes providing objective and complete advice, not just following a client’s potentially misguided instructions. Statement II is correct as General Principle 6 requires a licensed person to avoid conflicts of interest and ensure its clients are fairly treated. A conflict arises between the client’s instruction and the firm’s duty to provide sound advice. This conflict must be properly managed. Statement III is incorrect. The duty to act in a client’s best interests overrides the obligation to simply follow instructions, especially when those instructions could be detrimental to the client or compromise market integrity. Suppressing material information would be a breach of General Principles 1 (Honesty and fairness) and 2. Statement IV is correct. General Principle 9 places the ultimate responsibility for the firm’s compliance with the Code of Conduct on its senior management. The Responsible Officer, as part of senior management, must ensure the firm’s actions and advice are proper and compliant. Therefore, statements I, II and IV are correct.

The correct answer is that they may be subject to either criminal prosecution, which could result in imprisonment and a significant fine, or proceedings before the Market Misconduct Tribunal, which could lead to disqualification and a cold shoulder order. The Securities and Futures Ordinance (SFO) establishes a dual-track regime for handling market misconduct. An action can be pursued either through criminal proceedings in a court of law (Part XIV, SFO) or through civil/administrative proceedings before the Market Misconduct Tribunal (MMT) (Part XIII, SFO). The choice of route depends on factors like the severity of the misconduct and the strength of the evidence. A critical principle is that of ‘no double jeopardy’; proceedings cannot be commenced under both routes for the same misconduct. Criminal prosecution can lead to severe penalties, including fines of up to HK$10 million and imprisonment for up to ten years. The MMT can impose sanctions such as disqualifying a person from being a director and issuing a ‘cold shoulder order’ which prohibits them from trading in Hong Kong’s markets for a specified period. One incorrect option suggests that both criminal and MMT proceedings can be pursued for the same act, which directly contradicts the ‘no double jeopardy’ rule. Another incorrect option wrongly limits the potential penalty to a fine and incorrectly states that imprisonment is not a possible outcome for this type of offense. The final incorrect option inaccurately describes the SFC’s enforcement process by suggesting a public censure is a mandatory first step before MMT or criminal action, which is not the case for serious misconduct.

The Hong Kong Codes on Takeovers and Mergers and Share Buy-backs apply to public companies in Hong Kong and companies with a primary listing of their equity securities in Hong Kong. For a company that is not incorporated in Hong Kong and does not have a primary listing in Hong Kong, the Executive will apply a ‘central management and control’ test to determine if it should be treated as a ‘public company in Hong Kong’ for the purposes of the Codes. The correct answer is that the location of the company’s central management and control is the most critical factor. Since the majority of the company’s board and senior management operate from Hong Kong, its ‘mind and management’ is located there, making it subject to the Codes despite its foreign incorporation and primary listing. The jurisdiction of incorporation is a legal formality but not the determining factor for the application of the Codes, which focus on economic and management reality. The exchange with the highest trading volume is not the formal test used by the Executive. While having a secondary listing on the SEHK establishes a connection to Hong Kong, it is not sufficient on its own to trigger the application of the Codes; the decisive factor in such cases becomes the location of central management and control.

The correct answer is that the offer is now deemed a mandatory offer, and the only condition permitted to remain is the offeror receiving acceptances that result in them holding more than 50% of the voting rights. According to the Hong Kong Code on Takeovers and Mergers, when an offeror’s actions during a voluntary offer trigger a mandatory offer obligation (by acquiring 30% or more of the voting rights), the offer immediately transforms. The rules governing mandatory offers then apply. A key feature of a mandatory offer is that it must be virtually unconditional from the outset. The only condition permitted is the 50% acceptance condition, meaning the offeror must achieve control of more than 50% of the company’s voting rights. All other conditions that may have been attached to the original voluntary offer (such as financing, regulatory approvals, or no material adverse change) must be waived. The idea that the offeror must re-submit the offer and that original conditions remain is incorrect because the transformation is immediate and the rules require other conditions to be dropped. The suggestion that the voluntary offer lapses and a new one must be made is procedurally false; the existing offer is converted, not replaced. Finally, the notion that the offeror can waive the obligation by selling down their stake is not a valid course of action once the mandatory offer threshold has been crossed in this manner; the obligation to all other shareholders has been established.

The correct answer is that the board must make an announcement because the significant and unexplained movement in its share price and trading volume triggers an obligation under the Hong Kong Code on Takeovers and Mergers. When an offeree company is in preliminary discussions that could lead to an offer, its board must closely monitor its share price. Undue movement creates a presumption that confidentiality has been lost and that a false market may be developing. Therefore, an announcement is required to inform the market of the situation, which typically states that the company has been approached or is in discussions that may or may not lead to an offer. Maintaining confidentiality and conducting an internal investigation, while a good corporate governance practice, does not replace the immediate regulatory requirement to make a public announcement to prevent a false market. The obligation to announce in this specific scenario falls on the offeree company, not just the potential offeror. Waiting for public rumours to emerge before acting is incorrect, as undue market movement is a standalone trigger for an announcement obligation under the Code.

The Securities and Futures Commission (SFC) encourages cooperation from licensed corporations during disciplinary proceedings, as detailed in its Guidance Note on Cooperation. The SFC may reduce the severity of a sanction if a firm demonstrates spontaneous and extensive cooperation. The most effective forms of cooperation involve taking substantive remedial actions that address the harm caused and prevent future occurrences. The correct answer is that proactively compensating all affected clients for their losses and implementing a new, externally audited control system to prevent recurrence is the most significant cooperative action. This approach directly addresses the client detriment and rectifies the underlying systemic failure, demonstrating a firm’s commitment to its regulatory obligations and the protection of client interests. Simply disciplining a single staff member may be insufficient if the problem is systemic, as it fails to address the root cause of the failure. Engaging a public relations firm is a commercial decision focused on reputation management and is not considered a form of regulatory cooperation by the SFC. Requesting that a significant disciplinary action be kept private contradicts the SFC’s principle of transparency and its practice of publicizing such actions on a public register, as required by the Securities and Futures (Licensing and Registration) (Information) Rules.

The Executive applies an economic or commercial test to determine if a company, particularly one with a secondary listing in Hong Kong, should be considered a public company subject to the Codes on Takeovers and Mergers and Share Buy-backs. This test considers several factors. Statement I is correct as the location of the head office and place of central management is a key factor. Statement II is correct because the extent of share trading in Hong Kong, especially if the bulk of trading shifts to the SEHK, is a primary consideration. Statement III is also correct as the number of Hong Kong shareholders is another primary consideration in the test. Finally, Statement IV is correct because the Executive assesses the existence or absence of protection available to Hong Kong shareholders. Since all four statements describe valid factors considered by the Executive, all are relevant to the determination. Therefore, all of the above statements are correct.

The correct answer is that the potential offeror and its concert parties are generally prohibited from announcing an offer or possible offer for the target company for a period of six months. This is a key provision under Rule 31.1(a) of the Hong Kong Code on Takeovers and Mergers. The rule is designed to prevent a company’s shares from being put into a false market by a potential offeror who has no serious intention of making a bid. By imposing a ‘cooling-off’ period, the Code ensures that once an offeror withdraws, the market has a period of stability. One of the incorrect options suggests the target company is restricted from soliciting other offers; this is incorrect as the restriction applies to the party that made the ‘no intention to bid’ statement, not the potential target. Another incorrect option states the offeror must pay a penalty to the SFC, which is not an automatic consequence of such an announcement. Finally, the suggestion that the offeror can make a new offer at any time if conditions change is false, as it directly contradicts the six-month restriction rule, although certain exceptions do exist, such as the emergence of a rival bid.

This question assesses the responsibilities of a financial adviser in a takeovers context, specifically concerning public statements, meetings, research reports, and document submissions under the Hong Kong Code on Takeovers and Mergers.

Statement I is correct. Under Rule 3 of the Takeovers Code, a statement of intention made by an offeror is treated as a firm statement that is binding, except in wholly exceptional circumstances with the Executive’s consent. This is to ensure that shareholders are not misled by statements that the offeror does not intend to honour.

Statement II is correct. To prevent selective disclosure of material information during an offer period, the Takeovers Code requires that if an offeror or offeree company meets with shareholders or investment analysts, a representative from their financial adviser must be present. The adviser must then confirm in writing to the Executive by noon of the following business day that no material new information was provided.

Statement III is incorrect. During an offer period, all entities within the same group as the financial adviser (acting for either the offeror or offeree) must cease issuing research reports on the companies involved in the offer. This restriction applies regardless of internal information barriers to avoid any potential influence on the market or conflicts of interest. The consent of the Executive is required prior to the release of any such material.

Statement IV is correct. Documents containing specific financial information, such as asset valuations or profit forecasts, must be prepared with a high standard of care. Under the Takeovers Code, such documents must be submitted to the Executive for comment and may not be published until the Executive has confirmed it has no further comments. This pre-vetting process ensures the information is fair and not misleading. Therefore, statements I, II and IV are correct.

Under the Hong Kong Code on Takeovers and Mergers, a special deal is an arrangement with a shareholder that is not extended to all other shareholders. Statement I describes an arrangement where a shareholder who is also part of management is offered a deal to retain an interest with a guaranteed minimum price. This is a classic example of a special deal concerning management retention, which requires consultation with the Executive and is subject to conditions such as a fairness opinion from the independent financial adviser and approval by independent shareholders. Statement II involves an agreement to sell assets of the offeree company to one of its shareholders, which is also explicitly defined as a special deal requiring Executive consent and shareholder approval. Statement IV, offering a fee to a shareholder for promoting the offer, is a finder’s fee, another category of special deal. Finally, Statement III describes an exclusivity agreement with the offeree company itself. While not a ‘special deal’ in the same sense as the others, it is an arrangement that is explicitly prohibited by the Takeovers Code because it restricts the offeree board’s ability to fulfill its fiduciary duties to act in the best interests of all shareholders. The question asks which are classified as a special deal OR a prohibited action. All four statements fall into one of these two categories. Therefore, all of the above statements are correct.

Statement I is correct. According to the Takeovers Code, following the commencement of an offer period, all entities within the same group as the financial adviser should stop issuing research reports on the offeree company. Furthermore, old research reports, which the Executive would normally regard as those issued within six months prior to the offer period, should be removed from relevant websites to avoid them being circulated. Statement II is correct. The Takeovers Code permits meetings with shareholders or the investment community, but an appropriate representative of the financial adviser must be present. This representative is required to confirm to the Executive in writing, by noon of the following business day, that no material new information was provided and no significant new opinions were expressed. Statement III is correct. The Takeovers Code treats statements of intention as firm commitments that are binding on the offeror. An offeror can only depart from such a statement in wholly exceptional circumstances, and would require the consent of the Executive. Statement IV is incorrect. A fundamental requirement under the Takeovers Code is that key documents, such as an offer document, must be filed with the Executive for comment prior to being released or published. The document may not be released until the Executive has confirmed that it has no further comments. Releasing it on the same day as submission violates this pre-vetting process. Therefore, statements I, II and III are correct.

Under the Hong Kong Code on Takeovers and Mergers, a partial offer is a type of voluntary offer that requires the consent of the Executive. The Executive will normally grant consent under two specific conditions. The first is when the offeror and its concert parties will hold less than 30% of the voting rights after the offer. The second condition, which applies in this case, is when the offeror and its concert parties already hold more than 50% of the voting rights, and the partial offer will result in their total holding being no more than 75%. The correct answer is the scenario where the offeror’s stake increases from 55% to 70%. This fits the second condition, as the initial holding is over 50% and the final holding does not exceed the 75% ceiling. A proposal to increase a holding from 20% to 40% would not normally be approved because it crosses the 30% mandatory general offer threshold, which a partial offer is not intended to circumvent. A proposal to increase a holding from 65% to 80% would also be rejected because, while the starting point is above 50%, the resulting stake of 80% exceeds the maximum permitted 75% threshold for this type of partial offer. Finally, structuring a partial offer on a ‘first-come, first-served’ basis is incorrect; the Code mandates the use of the common pool method to ensure all accepting shareholders are treated equally on a pro-rata basis.

Under the Hong Kong Code on Takeovers and Mergers, specific restrictions apply to the financial advisers of an offeree company during an offer period to prevent potential conflicts of interest and market manipulation. While these advisers are generally prohibited from purchasing shares of the offeree company or dealing in related derivatives, an important exception exists for their lending activities. The correct answer is that the adviser is permitted to provide a loan to a client for the purpose of purchasing the offeree’s shares, but only if this activity is part of the adviser’s ordinary course of business and is conducted on normal commercial terms. This exception acknowledges that many financial institutions have diverse operations, and it allows their standard lending business to continue, provided it does not create an undue advantage or conflict related to the takeover. Conversely, directly purchasing shares of the offeree company for the adviser’s own account is a prohibited action, unless the Executive’s consent is obtained. Engaging in securities lending transactions involving the offeree’s shares is also explicitly forbidden for the offeree’s advisers. The requirement to provide 24 hours’ public notice before selling shares is a rule that applies to the offeror and its concert parties, not to the financial adviser of the offeree company.

This question tests the understanding of a licensed corporation’s responsibilities when providing information to clients, particularly when referencing third-party sources, as governed by the SFC’s Code of Conduct. Statement I is incorrect because there is no absolute prohibition on including third-party links; the key is the manner in which they are presented. Statement IV is incorrect as there is no regulatory requirement to obtain prior approval from the owners of public websites like the SFC or HKEX to link to their main pages. The compliance obligation rests with the licensed corporation distributing the information. Statement II is correct because, under General Principle 1 (acting with honesty, fairness, and integrity) and specific rules on advertising (Paragraph 7 of the Code of Conduct), a firm must ensure all communications are fair and not misleading. Including links without context could imply an endorsement of all content on those sites. Statement III is also correct as including a clear disclaimer is a crucial risk management practice to ensure clients understand that the firm is not responsible for the content of external sites, thereby preventing potential confusion or misattribution of information. This aligns with the principle of providing clear and unambiguous information to clients. Therefore, statements II and III are correct.

Statement I is correct. Under the Prevention of Bribery Ordinance (POBO), a Takeovers Code (TC) Adviser and its staff are considered agents of their client. Section 9 of POBO makes it an offence for an agent to accept an advantage (the undisclosed fee) as an inducement for not acting in the best interests of their principal. Statement II is correct. Conspiracy to defraud is a common law offence involving two or more persons acting dishonestly to defraud a victim. The director and junior colleague collaborating to conceal material information from the board fits this definition. Statement III is correct. Under Section 89 of the Criminal Procedure Ordinance, an individual can be held criminally liable if they are found to have aided, abetted, counselled, or procured an offence committed by a corporation. The junior colleague’s active participation in altering the report would be considered aiding and abetting. Statement IV is incorrect. Individuals can be held personally liable for common law offences like conspiracy to defraud, even when acting in the course of their employment. Furthermore, directors and officers can be held liable for offences committed by the corporation with their consent or connivance under Section 101E of the Criminal Procedure Ordinance. Therefore, statements I, II and III are correct.

The correct answer is that the offer will lapse if the acceptance condition is not met by the deadline. According to the Hong Kong Code on Takeovers and Mergers, an offer must become or be declared unconditional as to acceptances by 7:00 pm on the 60th day following the posting of the offer document, except with the consent of the Executive. If this critical condition, typically set at over 50% of voting rights, is not satisfied by this final day, the offer fails and is considered to have lapsed. The offeror is not obligated to extend the offer, and any unilateral extension beyond Day 60 without Executive consent is not permitted. The provision for an offer to remain open for a further 14 days only applies after it has already been declared unconditional; it is not an automatic extension for a failing offer. Similarly, the 21-day period for fulfilling other conditions (up to Day 81) is only relevant once the offer has become unconditional as to acceptances. An offer cannot become unconditional if its primary acceptance condition has not been met.

The Share Buy-backs Code, which is part of the Hong Kong Code on Takeovers and Mergers, regulates how listed companies can repurchase their own shares. However, certain types of buy-backs are specifically exempt from its provisions. Statement I is correct because share buy-backs made in accordance with the terms of an employee share scheme are a recognized exemption. Statement III is correct as buy-backs of odd lots are also exempt, often done for administrative convenience to clean up the share register. Statement IV is correct because any share buy-back that is required by law or mandated by a court order is exempt from the Code’s requirements. In contrast, Statement II describes a standard on-market share buy-back conducted through the SEHK. This is the most common form of share buy-back and is precisely the type of transaction that the Share Buy-backs Code is designed to regulate; it is not exempt. Therefore, statements I, III and IV are correct.

Under the Hong Kong Code on Takeovers and Mergers, two key obligations arise in this scenario. First, a valuation of the offeree company’s properties is required when the offeree has ‘significant property interests’ and the offeror is an ‘interested party’. ‘Significant property interests’ are generally defined as property assets exceeding 15% of consolidated total assets. In this case, Zenith’s properties at 22% meet this threshold. An ‘interested party’ includes any person, together with their concert parties, holding 30% or more of the offeree’s voting rights. Apex’s 35% holding qualifies it as an interested party. Therefore, a property valuation is mandatory and must be conducted by a qualified professional, such as a member of The Hong Kong Institute of Surveyors. Second, for any offer where the consideration is cash, the offeror’s financial adviser must provide a confirmation to the Executive stating that the offeror has sufficient financial resources to satisfy full acceptance of the offer. This is a fundamental requirement to ensure the offer is credible. The correct course of action combines both these duties. An incorrect option suggests a 50% threshold for the property valuation; this higher threshold is relevant for determining if valuations of an associated company’s properties are needed, not for the initial trigger concerning the offeree itself. Another incorrect option wrongly suggests the financial adviser can perform the property valuation; valuations of land and buildings must be done by an independent qualified surveyor. Finally, the suggestion that a financial resources confirmation is waived for a mandatory offer is incorrect; this confirmation is required for all cash offers to protect the market’s integrity.

The correct answer is that the Codes are non-statutory and breaches do not constitute criminal offences; however, the SFC can impose significant sanctions, including public statements, compensation orders, and ‘cold shoulder’ orders restricting access to market facilities. The Codes on Takeovers and Mergers and Share Buy-backs are issued by the Securities and Futures Commission (SFC) but are not part of the statutory law of Hong Kong. Consequently, a breach does not, in itself, amount to a criminal offence or give rise to civil liability in court. Instead, the SFC’s Executive and the Takeovers and Mergers Panel enforce the Codes through a range of disciplinary actions. These sanctions are designed to ensure compliance and maintain an orderly market. They can include private reprimands, public censures, orders requiring compensation to be paid to shareholders, and the issuance of a ‘cold shoulder’ order, which effectively denies the breaching party access to Hong Kong’s securities markets for a specified period. Stating that violations are criminal offences under the Securities and Futures Ordinance is incorrect; the Codes are separate from statutory legislation, although conduct breaching the Codes may sometimes also breach the SFO. The claim that the Hong Kong Stock Exchange is the sole enforcer and that delisting is automatic is also false; the SFC is the primary administrator of the Codes, and while the HKEX may take action, delisting is not an automatic consequence. Finally, suggesting that breaches are only handled through private, confidential warnings is misleading, as the SFC frequently publishes its disciplinary rulings to inform the market and deter misconduct.

The Share Buy-backs Code sets out specific disclosure requirements for the circular sent to shareholders concerning a proposed off-market share buy-back. Statement I is correct because the Code mandates that the circular must contain the advice of an independent financial adviser (IFA) and the recommendation of an independent committee of the board to ensure minority shareholders receive impartial guidance. Statement II is also correct; as an off-market buy-back is a specific transaction with identified parties, the circular must disclose information about the proposed offeree(s) and the detailed terms of the agreement. Statement IV is correct as the circular must contain the information set out in Schedule III of the Codes, which includes confirmation of sufficient financial resources to complete the offer and details of the company’s capital structure. Statement III is incorrect because the Executive’s approval is normally conditional upon shareholder approval at the general meeting. The circular is issued to obtain this shareholder approval, so it cannot state that unconditional approval from the Executive has already been granted. Therefore, statements I, II and IV are correct.

Statement I is correct. Under the Takeovers Code, following the commencement of an offer period, all entities within the same group as the financial adviser must stop issuing research reports on the offeree company. This is to prevent the release of information that could influence the market or shareholders. Statement II is correct. As per Note 1 to Rule 8 of the Takeovers Code, when an offeror or offeree company holds meetings with the investment community, a representative of its financial adviser must be present. The adviser must then confirm in writing to the Executive by noon of the following business day that no material new information was provided or significant new opinions expressed. Statement III is correct. Rule 2.4 of the Takeovers Code treats a public statement of a firm intention to make an offer as a binding commitment. The offeror is then obligated to proceed with the offer, save for in wholly exceptional circumstances, which are interpreted very narrowly by the Executive. Statement IV is incorrect. Rule 8.2 of the Takeovers Code requires that key documents, including the announcement of a firm intention to make an offer, must be filed with the Executive for comment prior to being published. The document may not be released until the Executive has confirmed that it has no further comments. Simultaneous publication and submission is not permitted. Therefore, statements I, II and III are correct.

The correct answer is that the disposal of a subsidiary accounting for 8% of the company’s consolidated revenue is the action that would be considered a frustrating action requiring shareholder approval or an Executive waiver. Under the Hong Kong Code on Takeovers and Mergers, an offeree company must not take certain actions during an offer period that could frustrate the offer without shareholder approval. The disposal of assets of a ‘material amount’ is one such prohibited action. The Code adopts the same test as the Listing Rules for a ‘discloseable transaction’ to determine materiality, which is triggered when any of the percentage ratios is 5% or more. Since the subsidiary accounts for 8% of revenue, its disposal is considered material and is therefore a frustrating action. The payment of a regularly scheduled final dividend that was determined and announced before the offer period is considered an action in the ordinary course of business and is not a frustrating action. Granting share options to employees in line with the established practice and terms of a pre-existing, shareholder-approved scheme is an action for which the Executive will normally grant consent. A salary increase resulting from a genuine promotion that was part of a long-term succession plan is not automatically restricted, although the offeree company is required to consult the Executive in advance.

This question assesses the understanding of concert party presumptions under the Hong Kong Code on Takeovers and Mergers.

Statement I is correct. According to Class (4) of the concert party presumptions, a fund manager is presumed to be acting in concert with any person whose investments it manages on a discretionary basis. Therefore, Apex Capital’s fund management division would be in concert with Apex Capital itself regarding the shares held in the discretionary portfolios.

Statement II is incorrect. The Takeovers Code clarifies that a shareholder giving an irrevocable undertaking to an offeror to accept an offer will not, by that action alone, lead to a presumption that the shareholder is acting in concert with the offeror. Other factors would need to be present to establish a concert party relationship.

Statement III is correct. This directly reflects Class (6) of the concert party presumptions, which states that directors of a company subject to an offer (or where an offer is believed to be imminent) are presumed to be acting in concert with their close relatives and certain related entities.

Statement IV is incorrect. The Takeovers Code provides an exception for authorised institutions or banks lending money in the ordinary course of business. An arm’s length commercial loan to finance an acquisition does not, by itself, cause the lending bank to be considered a concert party of the borrower/offeror. Therefore, statements I and III are correct.

The correct answer is that the initial guidance will likely be a non-binding consultation, and a formal, binding ruling requires a separate application. The Executive of the SFC’s Corporate Finance Division is the primary administrator of the Takeovers Code and encourages parties to consult with it in advance, especially when there is doubt about the application of the Code. These initial consultations are typically informal, verbal, and do not result in a formal, binding decision. Their purpose is to provide guidance and help parties avoid potential breaches. If a party requires a definitive and binding decision on a matter, they must make a separate, formal application for a ruling. The Executive does not automatically issue binding rulings upon an initial inquiry. It is incorrect to state that the Executive would refuse to provide guidance before a formal offer is announced; in fact, early consultation is encouraged. It is also incorrect to suggest the Takeovers and Mergers Panel would be the direct point of contact for such a query, as the Executive is the first layer of administration and the main initial contact for persons involved in Takeovers Code transactions.

Under Rule 22 of the Takeovers Code, associates of an offeror or offeree company must disclose their dealings in relevant securities during an offer period. Apex Asset Management is an associate of the offeree company, Global Tech, because it controls more than 5% of its voting rights. Statement I is incorrect because the deadline for disclosing dealings in Hong Kong is noon on the business day following the transaction; the two-day deadline applies to transactions in the United States. Statement II is incorrect because the Code explicitly states that where a dealing is done by a fund manager on behalf of discretionary clients, it is not necessary to name the clients in the disclosure. Statement IV is incorrect because while there are exemptions for Exempt Fund Managers (EFMs), an EFM that is an associate by virtue of holding more than 5% of the shares of the offeror or offeree company is still required to make a public disclosure of its dealings. Statement III is correct as the disclosure must contain an explanation of how the person is an associate, which in this case is due to its shareholding exceeding 5%. Therefore, statement III is correct.

According to Rule 10 of the Takeovers Code and its associated Practice Notes, specific disclosures and procedures are required during an offer period. Statement I is correct because a material increase in remuneration within six months of the offeree board circular for a director’s service contract with more than 12 months to run is considered an amendment. Such a contract must be disclosed in the offer document. Statement III is also correct. As per Rule 9.4 of the Takeovers Code, any subsequent document sent to shareholders must update material information previously provided. If a profit forecast was included, it must be accompanied by a directors’ statement confirming its continued validity. Statement II is incorrect; under Note 3 to Rule 8.1, if an offeree company has material new information to announce after Day 39, it must consult the Executive in advance. The Executive will normally consent to the announcement, and may grant an extension to the offer timetable. The company should not withhold the information. Statement IV is incorrect. According to Rule 15.5 of the Takeovers Code, on the closing date, the offeror must inform the Executive of its decision by 6:00 pm and publish a public announcement by 7:00 pm. The deadline to inform the Executive is 6:00 pm, not 7:00 pm. Therefore, statements I and III are correct.